I have to admit these days, when the market opens with a little heft, my first instinct is to determine what we should take profits on into strength. My second instinct is what kind of dynamics are we dealing with today, and do I need to adjust or simply weather the storm? It’s a lot of mental gymnastics. The better part of valor is to take profits as we did with Nucor Corp (NUE) and try to limit losses like Comerica (CMA).

This is the time to reassess fundamentals and weigh them against assumptions on Federal Reserve policy and the direction and impact of inflation. We are also using charts to assess conviction among current holders and would-be buyers during this process. There are intangibles as well, including the market bias, and there are always make mistakes to be rewarded on the upside, but can deliver crushing blows when it shifts to the downside.

Moreover, the crowds are moving around like the contents inside a lava lamp totally going limp when the tide turns. That’s what we saw yesterday, and sadly, it includes almost all publicly traded stocks.

On that note, every sector finished in the red yesterday, with Energy (XLE) leading the way on the downside.

Few Winners

A few specks of green with Elon Musk leading the way after that splendid earnings release from Tesla (TSLA).

Market Breadth

That was a rough session with more than 6,200 decliners on the New York Stock Exchange (NYSE) and the NASDAQ Composite. The new highs-to-lows ratio is still not as ugly as it was last month and in February, but there is nothing to cheer about with this picture.

Market Breadth	NYSE	NASDAQ
Advancers	656	1,082
Decliners	2,659	3,652
New Highs	169	100
New Lows	251	480
Up Volume	735.68 million	1.42 billion
Down Volume	3.79 billion	3.68 billion

Don’t Speak

Don't speak

I know just what you're thinkin'

I don't need your reasons

Don't tell me 'cause it hurts

-No Doubt

Yesterday, the market reacted negatively to hearing from Jay Powell and even President Biden. Neither said anything new, per se; but their comments were a reminder of the doubt we have in officials in charge of fixing things.

Their comments underscored the problems, and the inability to resolve them or prevent them from happening in the first place. President Biden sending more equipment to Ukraine makes us wonder how much should and could have been done to prevent the invasion in the first place. But the biggest hit to stocks yesterday were comments from the Federal Reserve chairman, the shadow chairman.

These headlines came across the tape from Powell:

POWELL: OUR GOAL IS A SOFT LANDING

POWELL: WE'RE GOING TO DO THE VERY BEST TO ACCOMPLISH SOFT LANDING.

POWELL: MY GOAL IS TO GET INFLATION DOWN WITHOUT A RECESSION.

POWELL: THE ECONOMY IS DOING WELL, AND THE LABOR MARKET IS TIGHT.

POWELL: IT'S ESSENTIAL TO RESTORE PRICE STABILITY

POWELL: MANY AT THE FED THOUGHT IT WOULD BE APPROPRIATE FOR ONE OR MORE 50 BPS HIKES

POWELL: IT IS APPROPRIATE TO BE MOVING MORE QUICKLY

POWELL: 50 BPS IS ON THE TABLE

POWELL: HAD EXPECTATION INFLATION WOULD PEAK AROUND THIS TIME

POWELL: WANT TO SEE ACTUAL PROGRESS ON INFLATION COMING DOWN

POWELL: IT MAY BE PEAK WAS IN MARCH, BUT WON'T COUNT ON IT

POWELL: WE ARE GOING TO GET EXPEDITIOUSLY TO MORE NEUTRAL RATES

POWELL: LESS GLOBALIZATION COULD MEAN HIGHER INFLATION, LOWER PRODUCTIVITY

POWELL: IS CLEAR THAT GLOBALIZATION HAS SLOWED DOWN, MAY GO INTO REVERSE

POWELL: PROBABLY NOT GOING BACK TO THE OLD PREPANDEMIC ECONOMY

POWELL: "50 basis points will be on the table for the May meeting." "Markets are processing what we're seeing. They're reacting appropriately, generally. But I wouldn't want to bless any particular market pricing."

Headlines from Bullard – who contradicted Powell on the soft landing while also imploring folks not to be babies:

BULLARD: A 75-BP HIKE HAS BEEN DONE AND THE WORLD HAS NOT COME TO AN END

BULLARD: BOND MARKET NOW IS NOT LOOKING LIKE SAFE PLACE TO BE

BULLARD: FED ISN'T AS FAR BEHIND THE CURVE AS YOU THINK WE ARE

BULLARD: THE FED IS BEHIND THE CURVE. THERE WILL BE NO HARD LANDING.

BULLARD: INFLATION EXPECTATIONS ARE THREATENING TO BECOME UNMOORED.

BULLARD: I SEE US GDP OF ABOUT 3% IN 2022.

Soft Landing

We know soft landings are hard- the last one was engineered in 1994-95. But most observers say they are impossible during an economic slowdown, and that’s exactly what the tea leaves are reading.

We could have done a lot more for Ukraine, including getting them fighter jets months ago and other weapons systems instead of announcing a new package every other week after all this damage is done.

Powell should look at that as an allegory and go hard as possible right out of the gate. The Fed is jawboning the heck out of the market, so we expect tough action immediately, not in dribs and drabs.  Why is the Street modeling for 75-basis points (bps) in June instead of May?  I know they want to curb, not break the economy and jobs market; but take the strongest actions while the patient is in their best health.

Portfolio Approach

We closed a position in Materials yesterday in our Hotline Model Portfolio. 

Today's Session

It's all about the Fed guessing game, as some are now saying there will be a 50 bps hike at the September meeting as well.  

Watching the ten year to see if 3.00% holds as resistance and the law of round numbers is satisfied.

Comments

Charles, is there one or two investments (LONG TERM) that could protect us if inflation continues to climb for months in the future? gold - bitcoin - bonds - treasury George Colby on 4/22/2022 9:44:28 AM

Told ya so back in Oct. 21 Charles Haselberger on 4/22/2022 1:17:21 PM

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